Ace Aviation holdings Q4 report

Old Mar 9, 05, 6:22 am
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Ace Aviation holdings Q4 report

http://ca.us.biz.yahoo.com/cnw/05030...e_resul_1.html

Operating loss of 3 MM
Profit of $15 MM


Pretty good considering the fuel price shock and very good compared to WS
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Old Mar 9, 05, 7:11 am
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From AC Corporate Communications:

ACE AVIATION HOLDINGS INC. RELEASES FOURTH QUARTER RESULTS:
REPORTS NET INCOME OF $15 MILLION

OVERVIEW
• Net income for the quarter of $15 million compared to a net loss of $768 million in the fourth quarter of 2003 which included $560 million of reorganization and restructuring items.
• Operating loss of $3 million compared to an operating loss before reorganization and restructuring items of $77 million in 2003, despite an increase in fuel expense of $142 million or 49 per cent.
• Passenger revenues up $66 million or 4 per cent.
• System passenger load factor up 4.7 percentage points to 75.5 per cent, a record for the fourth quarter.

ACE Aviation Holdings Inc. (ACE) reported today an operating loss of $3 million for the fourth quarter of 2004, an improvement of $74 million from the operating loss before reorganization and restructuring items of $77 million recorded in the fourth quarter of 2003, despite a 49 per cent or $142 million increase in fuel expense. The improvement was largely due to an increase of $86 million or 5 per cent in transportation revenues as a result of higher traffic. Passenger revenue per available seat mile (RASM), on a comparable basis, is up 4 per cent reflecting an improvement of 4.7 percentage points in passenger load factor. Domestic unit revenues were up 9 per cent, converting to 16.96˘ on a stage-length adjusted basis to that of the airline’s main domestic competitor, believed to be a premium of approximately 50 per cent. Operating expenses increased only $11 million in spite of the fuel expense increase of $142 million which offset the continued cost reductions that the Corporation has achieved. Excluding fuel expense, unit cost is down 5 per cent from the fourth quarter of 2003 and down 19 per cent compared to the fourth quarter of 2002. Including fuel expense, unit cost is up 3 per cent over the fourth quarter of 2003. Employee productivity, as measured by available seat mile per employee, grew 16 per cent when compared to the fourth quarter of 2002.

Foreign exchange gains on long term monetary items of $98 million were recorded in the quarter. Net income for the quarter was $15 million, an improvement of $223 million from the fourth quarter of 2003, excluding reorganization and restructuring items of $560 million in the 2003 quarter.

“Given the current difficult operating environment, featuring low North American yields and record high fuel prices, I am satisfied with these financial results,“said Robert Milton, President, CEO and Chairman of ACE Aviation Holdings Inc. “Furthermore, despite record fuel prices significantly above those projected in the Circular and Proxy Statement dated July 12, 2004 (the Circular), we are right on track and have exceeded our $1.1 billion EBITDAR forecast for 2004.

“In particular, it is encouraging to note that our operating margin is better than that achieved by any of our major North American competitors. We generated solid traffic growth and achieved record load factors again throughout the quarter. Our domestic performance was particularly strong throughout 2004. We achieved solid year-over-year domestic traffic growth despite our reduction in capacity and the significant growth in capacity deployed by our competitors. This clearly demonstrates that Air Canada is the airline of choice of Canadians for the lowest fares to the greatest number of destinations every day.”

Earnings before interest, taxes, depreciation, amortization and aircraft rent (EBITDAR) (1), before reorganization and restructuring items, amounted to $1.146 billion for the full year ended December 31, 2004 and exceeded the Corporation’s projected 2004 EBITDAR of $1.1 billion described in ACE’s business plan as outlined in the Circular. This was achieved despite $79 million in additional fuel costs.

The Corporation continues to expect improved operating and financial performance during 2005 resulting from revenue enhancement and cost reduction measures implemented during the restructuring and from additional measures in the fourth quarter of 2004 and the full year 2005. The Circular provided an EBITDAR projection of $1.6 billion for 2005, which was based on an assumed average 2005 crude oil price of approximately US $35 dollars per barrel for West Texas Intermediate (WTI) crude oil. While crude oil prices are now estimated to be significantly higher than this level, the Corporation remains committed to achieving its $1.6 billion EBITDAR target for 2005 as greater revenues and additional cost savings in specific areas are forecast to offset higher projected fuel expenses based on internal estimates. Crude oil and fuel prices are currently at record high levels and exceed internal estimates. As fuel prices are subject to many external factors beyond the Corporation’s control, the Corporation may not be able to fully mitigate the potential adverse effect that this or other factors could have on the 2005 EBITDAR projection.

“Looking forward, we’re moving ahead with the implementation of our plan to realign our network and fleet as Air Canada Jazz takes delivery of the first 15 Bombardier CRJ-705 aircraft commencing in May 2005. The addition of these jet aircraft to the Air Canada Jazz fleet will allow us to boost regional jet service to communities across Canada thus offering superior comfort, choice in non-stop markets served and more frequencies. Air Canada’s fleet will expand by six additional wide bodies to accommodate international growth this summer and 17 of the 60 state-of-the-art Embraer aircraft on order will be introduced to the mainline fleet in the last two quarters of the year,” said Mr. Milton.

Air Canada will begin taking delivery of 15 Embraer 175 aircraft in July 2005. The Embraer 175 will be configured in two classes of service with nine seats in Executive Class with three abreast seating offering 39 inches of legroom, and 64 seats in Hospitality with four abreast seating offering 32 inches of legroom. In November 2005, Air Canada will begin taking delivery of 45 Embraer 190 aircraft configured in two classes of service with 9 seats in Executive Class with three abreast seating offering 38 inches of legroom, and 84 seats in Hospitality with four abreast seating offering 33 inches of legroom and featuring spacious overhead bins. The new Embraer aircraft will be deployed throughout Air Canada’s North America network.

In 2004, Air Canada continued the expansion of its Latin America network with the launch of new non-stop services to Bogota, Caracas, Lima and increased services to Buenos Aires and Sao Paulo. In August, Air Canada launched the first-ever non-stop service between Toronto and Hong Kong operated using its new Airbus A340-500, the world’s longest range airliner, featuring lay flat seats in Executive First and personal television monitors with video on demand for Hospitality customers. The carrier also enhanced its Asia-Pacific service with the introduction of new Sydney-Vancouver non-stop flights. In 2005, Air Canada will continue to expand its Asia network with the introduction of new non-stop services to Beijing and Seoul from its main hub at Toronto’s Pearson airport offering convenient connections throughout its global network.

As part of its international growth plans, Air Canada is reinvesting in its in-flight product through an extensive aircraft interior refurbishment program featuring a new lie-flat seat for international Executive First and new seatback personal video systems for all aircraft larger than the 50-seat regional jets. Air Canada will thus become the first airline in the Americas to offer fully interactive, personalized entertainment choices on all its mainline aircraft. The introduction of a single in-flight entertainment system fleet wide will replace multiple systems currently in use and provide customers and employees with added benefits of ease of use as well as streamlining training and maintenance.

Throughout 2004, Air Canada continued the implementation of web-based technology solutions to simplify travel and put more control in the hands of its customers through automation. After becoming the first North American full service carrier in May 2003 to simplify its domestic fare structure, Air Canada expanded its popular simplified online fares throughout its U.S. network in February 2004. The carrier continued to lead traditional carriers in fare simplification with the elimination of return fare and minimum stay requirements in North America, and made on-going enhancements to its website booking engine. In addition, it led the industry with the introduction of a series of self-service online multi-trip air passes, and became the first Canadian carrier to offer web-check-in.

The Corporation also announced that Frank J. McKenna, the former Premier of New Brunswick has resigned from the ACE board effective March 1, 2005 as a result of his appointment as Canadian Ambassador to the United States.

In addition, the Corporation announced today that the Audited Consolidated Statements of Operations and Retained Earnings (Deficit) and Cash Flow of ACE for the year ended December 31, 2004, and the Audited Consolidated Statement of Financial Position of ACE as at December 31, 2004 (the "Annual Statements") will be made available on ACE's and Air Canada's website www.aircanada.com and at SEDAR.com in the following days. A copy may also be obtained on request by contacting Shareholder Relations at (514) 205-7856. The Annual Statements cover Air Canada's operations and cash flows for the nine months ended September 30, 2004 as well as those of ACE for the period ended December 31, 2004 and set out ACE's financial position as at December 31, 2004. The financial information in the Annual Statements has previously been disclosed with the exception of the fourth quarter results of ACE announced today and certain adjustments related to the fair value of the assets and liabilities of ACE as at September 30, 2004 under fresh start reporting.

On September 30, 2004, ACE became the successor and parent holding company of the reorganized Air Canada and its subsidiaries. As a result, the consolidated statement of financial position as at September 30, 2004 is that of ACE and is presented on a fresh start reporting basis. All assets and liabilities of ACE are reported at fair values, except for future income taxes which are reported in accordance with the requirements of Section 3465 of the CICA Handbook. The fair values of the assets and liabilities of ACE were based on management's best estimates as at September 30, 2004. The determination of the fair values of the assets and liabilities of ACE had not been finalized as at the date of preparing the interim consolidated balance sheet previously filed. Management's final valuations will be reflected in the Annual Statements. There are no changes to the reported earnings or cash flows of the Corporation for the periods ended September 30, 2004 as previously filed.

(1) EBITDAR is a non-GAAP financial measure commonly used in the airline industry to assess earnings before interest, taxes, depreciation and aircraft rent. This measure is used to view operating results before aircraft rent and ownership costs as these costs can vary significantly among airlines due to differences in the way airlines finance their aircraft and asset acquisitions. EBITDAR is not a recognized measure for financial statement presentation under GAAP and does not have any standardized meaning and is therefore not comparable to similar measures presented by other public companies. Refer to the attached Highlights or ACE’s 2004 Management’s Discussion and Analysis for a reconciliation of EBITDAR before restructuring and reorganization items.
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Old Mar 9, 05, 7:26 am
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Allright!

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Old Mar 9, 05, 7:27 am
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Originally Posted by parnel
http://ca.us.biz.yahoo.com/cnw/05030...e_resul_1.html

Operating loss of 3 MM
Profit of $15 MM


Pretty good considering the fuel price shock and very good compared to WS
Depending on who one compares to. Pretty awful if comparing to CX.
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Old Mar 9, 05, 11:52 am
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What do net results include that operating results do not?
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Old Mar 9, 05, 12:26 pm
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Originally Posted by tracon
What do net results include that operating results do not?
The majority of it is a Foreign Exchange gain:

Code:
Operating income (loss) before                             04Q4          03Q4
     reorganization and restructuring items                 (3)          (77)

      Reorganization and restructuring items                 -          (560)

    Non-operating income (expense)
      Interest income                                       11             4
      Interest expense                                     (60)          (19)
      Interest capitalized                                   2             -
      Loss on sale of and provisions on assets               -          (118)
      Other                                                (20)            1
                                                -----------------------------
                                                           (67)         (132)
                                                -----------------------------

    Loss before foreign exchange on
     non-compromised long-term monetary
     items and income taxes                                (70)         (769)

    Foreign exchange gain (loss)                            98            (7)
                                                -----------------------------

    Income (loss) before income taxes                       28          (776)

    Recovery of (provision for) income taxes               (13)            8
                                                -----------------------------

    Income (loss)                                    $      15     $    (768)
                                                -----------------------------
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Old Mar 9, 05, 12:54 pm
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Of course, to the untrained eyes, this seemed good. The fact is, on announcement of this news, the stock tanked by more than 2% from last night's close. It has since regained a little bit. But, the pessimism was due to the fact that Air Canada is still unable to make its operations profitable. It's turning black this quarter due to FX, hardly a reliable source by any means. Stripping the FX gains, among others, the company is still losing money and therefore is not a profitable company.
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Old Mar 9, 05, 3:33 pm
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Originally Posted by Guava
Of course, to the untrained eyes, this seemed good. The fact is, on announcement of this news, the stock tanked by more than 2% from last night's close. It has since regained a little bit. But, the pessimism was due to the fact that Air Canada is still unable to make its operations profitable. It's turning black this quarter due to FX, hardly a reliable source by any means. Stripping the FX gains, among others, the company is still losing money and therefore is not a profitable company.

In consideration of the fact the quarter started on day one out of CCAA its not bad;they had no time to redo the exit ST debt from the sheisters at GE capital and do some fuel hedging. Q4 has as well traditionally been the slowest quarter in the NA airline industry and AC did not make money in some good years in Q4.

They also increased their cash hoard which is now around $2 Billion.

You can go back to the mailroom now.

Last edited by parnel; Mar 9, 05 at 3:41 pm
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Old Mar 9, 05, 6:24 pm
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There is some very significant news for frequent flyers and Aeroplan points holders that is not in the printed releases, but it was mentioned at the top of Robert's commentary on the analysts call.

The revenue from Aeroplan rewards is now included in the operating statistics and not in the non-operating line. This seems like a small accounting change, but I feel it makes a significant change for those looking to redeem AE points for flights on Air Canada.

Thus:

-To the revenue controllers that are looking at the booking levels on flights, AE now is the passenger airlines 'biggest customer' (it used to be Canada Post). It was reported at $41 million in the 4th quarter alone and growing significantly.

-Previously the people that run the airline side of things received no credit for AE bookings, but now they are a revenue stream for the branch.

-If a flight segment is doing poorly, then it benefits the revenue controller to open up AE redemption allotments to gain more customers as they will actually see a gain in revenue, rather than a dilution of their yields.

-The effect in the 4th quarter was to raise the Yield from 15.6 cents per mile to 16.0 cents per mile system wide.

-Also since the airline must now buy AE points from Aeroplan they will also be encouraged to sell as much to Aeroplan as possible to pay for these points. A sell to Aeroplan is a seat redemption.

-It is also possible that if/when upgrades with points comes along that the airline side will be gaining points for each upgrade and thus be able to post an upgrade as revenue.

This could be a big change for Aeroplan card holders.
 
Old Mar 9, 05, 6:50 pm
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Originally Posted by exAC
The revenue from Aeroplan rewards is now included in the operating statistics and not in the non-operating line. This seems like a small accounting change, but I feel it makes a significant change for those looking to redeem AE points for flights on Air Canada.

Thus:

-To the revenue controllers that are looking at the booking levels on flights, AE now is the passenger airlines 'biggest customer' (it used to be Canada Post). It was reported at $41 million in the 4th quarter alone and growing significantly.

-Previously the people that run the airline side of things received no credit for AE bookings, but now they are a revenue stream for the branch.

-If a flight segment is doing poorly, then it benefits the revenue controller to open up AE redemption allotments to gain more customers as they will actually see a gain in revenue, rather than a dilution of their yields.

-The effect in the 4th quarter was to raise the Yield from 15.6 cents per mile to 16.0 cents per mile system wide.

-Also since the airline must now buy AE points from Aeroplan they will also be encouraged to sell as much to Aeroplan as possible to pay for these points. A sell to Aeroplan is a seat redemption.

-It is also possible that if/when upgrades with points comes along that the airline side will be gaining points for each upgrade and thus be able to post an upgrade as revenue.

This could be a big change for Aeroplan card holders.

Good find EX AC; that looks like instant KK for other levels could come back as well and the potential use of points for U/G's is good news as well.
Hell I'm buying a dozen bottles of wine or so tonight and will use my AMEX gold instead of my Amex Airmiles card. Might now be worth it to get the platinum card.
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Old Mar 9, 05, 6:59 pm
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It should be no surprise that as it now actually pays for seats, Aeroplan is AC's largest single customer. Suppose it replaces Air Miles, who used to be one of AC's major seat buyers, along with CUTS.

As for being able to still make a profit despite rising fuel prices, why should that be surprising? Have you looked at the "Carrier Admin Service Charge" on the last ticket you bought? It was worth about 9% of the base fare I just paid for a ticket to MUC, so that covers lots of fuel and the cost of Aeroplan miles. Essentially, a fare increase without calling it such, and likely goes directly to AC's bottom line.

"As part of its international growth plans, Air Canada is reinvesting in its in-flight product through an extensive aircraft interior refurbishment program featuring a new lie-flat seat for international Executive First and new seatback personal video systems for all aircraft larger than the 50-seat regional jets. Air Canada will thus become the first airline in the Americas to offer fully interactive, personalized entertainment choices on all its mainline aircraft. The introduction of a single in-flight entertainment system fleet wide will replace multiple systems currently in use and provide customers and employees with added benefits of ease of use as well as streamlining training and maintenance."

Looks like the Board approved the upgrading plan we heard about on Friday. Guess actual new widebody decision will have to wait for the next Board meeting.

As for the share price, it has been heading down for the past two weeks -- not quite 10% from the $35/$35 range to the current $32 range -- ever since all those positive forecasts were issued by analysts, and Parnel started heralding the fact that he is now a shareholder. Coincidence, or what?
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Old Mar 9, 05, 7:19 pm
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Originally Posted by Shareholder
As for the share price, it has been heading down for the past two weeks -- not quite 10% from the $35/$35 range to the current $32 range -- ever since all those positive forecasts were issued by analysts, and Parnel started heralding the fact that he is now a shareholder. Coincidence, or what?
Actually my options were struck at the same price as the Exec team
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Old Mar 9, 05, 9:42 pm
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Wonder when they'll actually start turning a real profit...
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Old Mar 9, 05, 9:52 pm
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Define real.
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Old Mar 10, 05, 1:02 pm
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Originally Posted by Clipper801
Depending on who one compares to. Pretty awful if comparing to CX.
Sorry, I'm not an analyst, but I'm a bit skeptical as to how CX came to the 1,000 plus million amount. May be that it's not really as impressive as it seems when it's properly analyzed. In any event, I don't think any North American airline can compare, let alone one just emerging from bankruptcy protection.
I guess, it being the easter season and all, a lot of folk were expecting some sort of a grand resurrection, with profits in the billions.
Considering the circumstances, and what ACE has to work with, it's a pretty decent result. Anyone who was expecting better than this must have either had their heads in the clouds, or really been without a clue as to the current situation. You can't expect huge profits practically overnight.
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